Understanding the Construction Business Structure
Many contractors understand the technical side of construction, but a lot of them are not as knowledgeable on the business and sales side of it.
The thing is, as a manager, you have to think of both the sales and the operations of the business if you want to succeed.
As a rule of thumb, half of your attention should be dedicated to sales, which includes functions like:
- Marketing your business
- Getting leads
- Estimating jobs
- Closing jobs
And the other half of your attention should be dedicated to operations such as:
- Project management
- Field supervision
- Suppliers and Vendors
A common mistake so many contractors make is that they get consumed with their operations and handling emergencies, that they end up neglecting their sales.
The solution is to free up your time, so that means delegating your work. Construction can be divided into four departments:
- Sales Department
- Accounting Department
- Project Management Department
- Field Operations Department
These four departments represent the key functions of your business that you need to free yourself of, in order to focus on growing your business instead of just running your business.
Tip #1: Increase your Sales in Construction
The first function you want to delegate is sales because, as the business owner, you are the best salesperson.
You’re the face of your business. There is a marketing concept that says that in order to have a successful movement there must be a leader to that movement and this applies to business as well. If your focus is to be the whole “army” behind your business, who will be its face?
On that note, let’s discuss the most time-consuming part of sales: estimating.
The Sales Secret: How to Manage your Estimating
Estimating is the engine that’s going to drive your entire company. The efficiency of your estimating can make or break your whole operation. What you feed into this engine are leads.
Getting leads is not that difficult. There’s word of mouth, lead generation platforms, etc.
You can check out our article on lead generation in construction if you’d like a more in-depth understanding on how to get more leads. Ideally, you should be able to get a hundred leads in a week, so that way you can cherry-pick the best ones.
Assuming this problem is solved, the next biggest issue contractors face is having time to estimate.
The solution for a lot of contractors is to outsource their estimating
They’re so busy fighting fires during the day, worrying about deliveries, worrying about managing their job sites that they have no time to estimate new bids.
The solution for a lot of contractors is to outsource their estimating to people like us, especially contractors that don’t want to hire an in-house estimator.
For smaller contractors, in-house estimators can be pricey and it can be hard to convince good estimators to work for small businesses. That’s why it may be better to use an on-demand estimating service like I Am Builders to start bidding for more jobs.
And if you think that sounds expensive, there is a trick to get free estimates. All you need to do is build in your overhead costs into each bid, which includes your estimating costs. Then, once you win a bid, you can gain back all that you spent on estimating, plus profit.
Tip #2: Delegate your Accounting
Your accounting department is going to be the group (or person) responsible for all things money.
Once you have found someone to sell the job and someone to manage it, you’re going to have to find someone to overlook the money, the delivery tickets, invoices. They also will handle cross-referencing AIA billings with your billings and essentially every other tedious accounting task.
So many contractors, because they don’t have their own accountant, handle all their billings only once a month and this is a recipe for disaster.
By doing your own bills, it’s even easier to miss deadlines, go negative on certain jobs, forcing you to use funds from other projects, and overall create a big mess.
Spare yourself the headache and hire someone for your accounting. You can more easily stay on top of billings and focus on your business.
Tip #3: Hire a Project Management Team
I can’t stress enough how important it is to delegate the running of your jobs to professionals that know what they’re doing, so that you can free yourself to go do other things.
Finding a team is not as difficult as it sounds. All you need to do is to find one key person, or maybe a few, that have enough experience to handle most of the management duties (construction management graduates aren’t a bad option).
Someone who is dedicated solely to project management can at the very least manage 5 jobs as a GC (10 if they are a subcontractor), making delegating this function essential to growing your business.
Giving 80% to 90% of your management duties to your PM team is more cost-effective,
With someone going to the meetings, going to the job site, holding walkthroughs, and handling emergencies, imagine how much time you can devote to finding more jobs and building relationships with your clients.
Of course, this doesn’t mean you shouldn’t be involved with managing your projects, but giving 80% to 90% of your management duties to your PM team is more cost-effective, especially when you consider the more tedious tasks of project management, like change orders and paperwork.
The benefits only increase if your team uses project management software like Procore, Corecon, or Buildertrend.
Tip #4: Don’t get Distracted by your Field Operations
Field operations are the largest part of construction and include many roles like general superintendents, project superintendents, assistant superintendents, pieceworkers, subcontractors, vendors, suppliers, and more.
These are the guys, the companies, the manpower that are going to actually build the work.
We’ve so far talked about sales, money, and management. Now, I’ve saved the actual construction part for last and that’s not a coincidence…
Many contractors tend to flip this list of priorities and focus on field operations first. The thing is, by devoting yourself to handling every emergency and every issue, you single handedly can stop your business from growing.
Because of how much time it takes for contractors to handle most of the day-to-day on their job sites, having a large, qualified staff of field supervisors is vital to setting up your construction business for success.